Industrial output news should fuel recession fears
Industrial output dropped again for the second time in 3 months down .7% from last month. Industrial goods are the lifeblood of the economy. Industry that creates products generates wealth and maintains a healthy cycle. Manufacturing dropped even more with a .8% drop from a month ago.
Wealth is created from generating more revenue than is needed to complete a good. In the case of automotive, Toyota buys $10,000 worth of parts that are merely paperweights until assembled. At that point it becomes a $15,000 car that generates wealth of $5,000. The customer gets a necessity, the producer gets a hefty profit. The net result is the creation of wealth which can only happen when a good is produced for more than it costs.
Manufacturing also maintains a healthy trade balanced. When a surplus of goods are produced domestically, many of them make their way to foreign consumers which feed money from their respective countries to the United States. Industry is a necessity to maintain economic vitality, something that everyone knows from their 12th grade economics class.
Hopefully some rebound will be found as the economic stimulus package makes it way to the home front. American consumers are likely to show their wild side again when their funded up by the checks that add up to $1800 for a family of four. Industrial orders and manufacturing numbers are lagging indicators however, goods produced this month are for future delivery. We won’t know for a few months how the numbers stack up when fresh credit hit’s the hands of American consumers.
The downturn in the US dollar is producing a greater number of foreign orders, which will help keep the US economy afloat by pumping in more cash. As the US dollar continues to drop, the Eurozone is likely to heat up industrial orders, certainly something that could help the current situation. At the moment, the stock markets are at the whim of an over inflated economy. Hold on to see what happens next.
